FSDH Initial Reaction: United Bank for Africa 3Q23 results 
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November 6, 2023/FSDH Research

Key Performance Highlights:

• United Bank for Africa reported a robust set of numbers for 3Q23, with the gross earnings rising 38.6% YoY to N327.1 billion and the net profit jumping 55.5% YoY to N71.1 billion in 3Q23. The growth in gross earnings was driven by a solid 48.7% YoY rise in interest income on amortised cost and FVOCI securities (72.7% of 3Q23 gross earnings) to N237.8 billion, coupled with a 35.3% YoY surge in fee and commission income (17.2% of 3Q23 gross earnings) to N56.4 billion in 3Q23 and a significant rise in the Bank’s net trading and foreign exchange income to N32.0 billion (9.8% of 3Q23 gross earnings) in 3Q23. Despite interest expense rising 26.3% YoY to N73.0 billion in 3Q23, primarily driven by increased customer deposits, net interest income was up 57.0% YoY to N165.0 billion.
   
• A handsome growth in fee & commission income (+35.3% YoY) and a relatively lower increase in fee & commission expense (+5.2% YoY) resulted in a net fee & commission income growth of 61.4% YoY to N36.0 billion in 3Q23. The fee & commission income was boosted by increased electronic banking income and commissions on transactional services. Moreover, the fee & commission income was supported by a rise in the account maintenance fee. The rise in fee & commission expenses was mainly driven by increased e-Banking expenses.
   
• The Group reported a net profit in trading and foreign exchange operations of N32.0 billion (+9.3% YoY), compared to a profit of N29.3 billion in the prior period, primarily driven by a growth in the fixed income and a gain in foreign currency revaluation. However, other operating income for the period decreased by 65.5% YoY to N729 million in 3Q23, mainly due to decreased dividend income. Consequently, non-interest income rose 28.0% to N68.7 billion compared to N53.7 billion in 3Q22.
   
• The Bank’s employee benefit expenses grew 46.5% YoY to N41.7 billion primarily due to a rise in wages and salaries, and the other operating expenses vaulted by 44.1% YoY to N96.3 billion in 3Q23. Consequently, profit before tax was up 86.6% YoY to N98.4 billion in 3Q23. UBA paid the income tax at an effective tax rate of 27.8% in 3Q23, up from 13.3% in 3Q22. However, the after-tax profit improved by a solid 55.5% YoY to N71.1 billion in 3Q23. The group earnings per share went from N1.29/share in 3Q22 to N1.94/share in 3Q23.
   
• Sequentially, the Company recorded a 54.0% QoQ decline in gross earnings to N327.1 billion in 3Q23. The net interest income grew 4.1% QoQ to N165.0 billion, primarily due to a 6.3% fall in interest expense. However, this was undermined by a 27.0% QoQ decrease in net fee & commission income to N36.0 billion in 3Q23, compared to N49.3 billion in 2Q23 and a significant fall in net trading and foreign exchange income to N32.0 billion in 3Q23, compared to N392.2 billion in 2Q23, leading to a 61.6% QoQ decline in operating income to N233.7 billion in 3Q23. The Company paid the income tax at an effective tax rate of 27.8% in 3Q23, up from 5.2% in 2Q23, which caused the Company’s net profit to decline by 78.1% to N71.1 billion in 3Q23 compared to N324.7 billion in 2Q23.

Market Reaction: The investor reaction to the 3Q23 results was buoyant as the United Bank for Africa stock rose 5.29% to close at N20.90 against a 1.65% rise in the All-Share Index on 31/10.

United Bank for Africa 3Q23 Earning Highlights

Source: Company Financials, FSDH